Q: I read with interest your article about how a government lien can short-circuit a short sale. I know of a similar situation but I do not know how to do the research needed to figure out what is the problem. Please tell me where to start.
The house in question was on a short sale but the real estate agent told me the contract was a mess. Later, I saw a sign in the yard that read, “For sale by owner. Make offer.” The sign was removed several days later.
Now, there is an orange sticker in the window placed by a company saying they no longer manage the property. I called the number and all they could tell me was that they were managing the property for a bank. They could not give me any information about the circumstances or the owner.
A: You should first know the difference between a short sale and a foreclosure. In a short sale, the owner of the home is trying to sell it even though he or she owes more on the home than what they can get for it. If a buyer brings an offer that is below what is owed on the home, the lender has to approve the sale, because the funds will be short the amount owed.
If a property has gone through foreclosure, the original owner of the home loses the property to the lender. The property becomes what is known as an REO property (real estate owned), that is a piece of property owned by the lender.
Somewhere in between a short sale and a foreclosure is the grey area where things get real messy. That seems to be the time you looked at this property.
The seller was probably unable to find a buyer for the property or was unable to convince the lender to agree to the short sale and the property proceeded into foreclosure. At this point, the seller might have given up and abandoned the property. The lender might have hired a company to take care of the property during the foreclosure proceedings and now the lender controls the property and may soon list it for sale.
Having said all that, the broker that told you the “contract” was a mess could have been referring to the short sale process and the inability to get the lender to agree to a short sale.
But in some cases, the owner of the home has fallen behind not only on his or her payments to one or more lenders, but has failed to pay property taxes, water bills, contractors for work performed on the home and may have even been sued by other creditors that have placed liens on the home. With all that going on, you could see how a real estate agent might say it’s a mess.
If you’re interested in the property, you might inquire with a real estate broker if the property has been listed for sale by the bank. If it has, you can start negotiating for the purchase of the home. If you can’t find listing information for the property, it may be that the bank (if it is the bank) has yet to list the property for sale or that the foreclosure process is still in the works.
If you are a bit savvy, you might be able to find information about the foreclosure process from the clerk of the court in the county in which the property is located.
Some counties around the country have put their court records on the Internet and you may be able to do some key online research about the property. However, if the information is not online, you might have to go to the courthouse and do the research in person.
If you decide to research the liens attached to the property yourself and have never done that before, you might get a helpful person at the courthouse to help you out. Otherwise, you should consult with an experienced real estate attorney who can help you perform your research as well as represent your interests in this transaction.